Hedge funds run by legendary names like George Soros and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That's why we pay special attention to hedge fund activity in these stocks.
Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI) was in 13 hedge funds' portfolios at the end of March. SPPI has experienced a decrease in hedge fund interest lately. There were 17 hedge funds in our database with SPPI positions at the end of the previous quarter. Our calculations also showed that SPPI isn't among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We're going to check out the key hedge fund action encompassing Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI).
Hedge fund activity in Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI)
Heading into the second quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of -24% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards SPPI over the last 15 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Armistice Capital held the most valuable stake in Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI), which was worth $20.6 million at the end of the first quarter. On the second spot was Renaissance Technologies which amassed $18.1 million worth of shares. Moreover, Millennium Management, Sio Capital, and Citadel Investment Group were also bullish on Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI), allocating a large percentage of their portfolios to this stock.
Seeing as Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI) has faced a decline in interest from the smart money, we can see that there exists a select few fund managers who sold off their full holdings by the end of the third quarter. Intriguingly, Mitchell Blutt's Consonance Capital Management said goodbye to the biggest position of all the hedgies followed by Insider Monkey, valued at about $26 million in stock. Samuel Isaly's fund, OrbiMed Advisors, also cut its stock, about $19.8 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 4 funds by the end of the third quarter.
Let's now take a look at hedge fund activity in other stocks similar to Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI). These stocks are Group 1 Automotive, Inc. (NYSE:GPI), KKR Real Estate Finance Trust Inc. (NYSE:KREF), Accelerate Diagnostics Inc (NASDAQ:AXDX), and Matthews International Corp (NASDAQ:MATW). This group of stocks' market caps are similar to SPPI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GPI,13,148023,4 KREF,9,42594,1 AXDX,11,66192,6 MATW,12,43871,0 Average,11.25,75170,2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $75 million. That figure was $66 million in SPPI's case. Group 1 Automotive, Inc. (NYSE:GPI) is the most popular stock in this table. On the other hand KKR Real Estate Finance Trust Inc. (NYSE:KREF) is the least popular one with only 9 bullish hedge fund positions. Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately SPPI wasn't nearly as popular as these 20 stocks and hedge funds that were betting on SPPI were disappointed as the stock returned -21% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.